Mexican Expansion Proving a Problemo

by louabbott on January 22, 2007

Los Angeles Business Journal – January 22, 2007

Likely it’s the problems inherent in multi-level marketing, but, whatever the cause, Herbalife Ltd. has once again been tripped up by its own success.Earlier this month, Chief Executive Michael Johnson shocked investors when the company he’s turned into a Wall Street darling lowered its 2007 sales expectations.

The problem? Some distributors in Mexico, now the company’s largest market, were selling goods at discounts and had enlisted unauthorized sales people, which is likely to dampen overall sales until the problem is fixed.

A startled Wall Street lopped 24 percent off the nearly $38 share price of the herbal supplement marketer on Jan. 5, leading longtime company critics to quip that Johnson, a former top Disney executive who assumed his post three years ago, had lost some of his pixie dust. The stock, which had fallen below $30, rallied a little thereafter and closed just below $32 on Jan. 18.

But other company observers say the early warning was actually a savvy move on Johnson’s part, enabling the company to move quickly to rein in renegade distributors who were creating dissention in its Mexican market before full 2006 earnings are reported in late February. Sales in Mexico have tripled over the last three years and account for 20 percent of global sales.

Read the entire article at the Los Angeles Business Journal

Also, read our company overview: Herbalife Facts, News and Review

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